Fewer retirees to have employer health insurance

WASHINGTON — WASHINGTON - Fewer retirees will have employer-sponsored health coverage in the future and those who do will pay a larger share of the costs, according to a survey of large employers released yesterday.

Ten percent of the companies in the survey said they had eliminated subsidized health benefits for future retirees during the past year. Another 20 percent said they likely would terminate health coverage for future retirees in the next three years.


The survey found that most firms had increased the amount retirees must contribute to health premiums in the past year, and 86 percent planned to increase such contributions within the next three years.

The survey was compiled by the Henry J. Kaiser Family Foundation, a nonprofit organization that analyzes health care issues, and Hewitt Associates LLC, a human resources firm with offices in 38 countries. They queried 408 large private-sector companies that offer health benefits in the survey.


The changes mentioned in the survey mostly affect new hires or current employees, as opposed to current retirees. Workers who retire before becoming eligible for Medicare typically rely on employers to provide health coverage. Those aged 65 and older generally use employer plans to supplement Medicare.

Health care expenses continued to rise among the surveyed companies. Employers paid $18.1 billion in 2002 to provide coverage to retirees and their dependents. Last year, the total climbed 13.7 percent to $20.6 billion.

Prompted by the higher costs, nearly half of all surveyed companies placed caps limiting the dollar amount they will spend on future retiree health obligations.

The caps require retirees to absorb a greater share of costs when spending exceeds a certain amount.

One-third of the firms have either reached their caps or expect to within the next one to three years.

The cost increases, financial caps and the impact on the bottom line have caused companies to re-examine their health care programs and make changes.

In the past year, most of those in the survey raised drug co-payments, co-insurance and general cost-sharing requirements.

Some increased deductibles, out-of-pocket limits and hospital co-payments.


Employees can assume health coverage will worsen. Most firms said they would increase cost-sharing requirements, deductibles, physician and hospital co-payments and out-of-pocket limits within the next three years.

Retirees "will have to find other ways to finance retirement" health care, said Frank McArdle, Hewitt Associates' Washington research office manager.

The study offered some hope: 12 percent of the companies said they improved or added retiree health coverage during the past year, and 98 percent of the respondents said they were unlikely to eliminate prescription drug coverage.

The survey, however, was taken last year before Congress enacted the new Medicare prescription drug legislation.